Coalition of Community Development Financial
Institutions
September 17, 2004
Mr. Robert E. Feldman
Executive Secretary
Attention: Comments/Legal ESS
Federal Deposit Insurance Corporation
550 17th Street, NW
Washington, DC 20429
RE: RIN 3064-AC50
Dear Mr. Feldman:
The Coalition of Community Development Financial Institutions (CDFI)
is a national organization representing the concerns and interests
of CDFIs. The newly proposed regulations concerning the Community
Reinvestment Act (CRA) would adversely affect the mission and goals
of our nationwide network of almost 1000 CDFIs. The CDFI Coalition
opposes the adoption of the proposed CRA regulations on the grounds
that the changes would hinder growth and expansion of financial services
and accessibility to capital in low and moderate-income communities.
The change in the community development test criterion, the increase
in the asset limit of a small bank, and the new definition of community
development activities in rural areas all serve to diminish the effectiveness
of the CRA for the CDFI industry and the communities CDFIs serve.
The CDFI Coalition opposes the change in the community development
test criterion for banks with assets between $250 million and $1billion
from requiring community development lending, investment, and services
to an optional choice of one of the three. The proposed change will
diminish the occurrence of all three criteria included in the community
development test. The ramifications of removing the required lending
and investment tests could lead to a dramatic reduction in the building
of affordable housing, investment in the Low Income Housing Tax Credit,
community health clinics, community centers, and economic development
projects, all critical to community development. Furthermore, the
relaxation of the lending test will remove the requirement of collecting
and reporting lending information relating to small businesses by
census tract and revenue size, mortgage lending, small farm finance,
and consumer borrowing, making an examination of community coverage
impossible.
The removal of the service test will severely retard the growth
of access to financial services to low and moderate-income consumers.
Low and moderate-income consumers rely on the CRA to a great extent
to ensure bank branches are located in areas far from population
centers with higher income consumers. Low and moderate-income Americans
are already at a great disadvantage compared to higher income consumers
when accessing financial services; this change will only exacerbate
the disparity.
The increase
in the asset definition of a small bank to quadruple the current
$250 million
dollar limit to $1 billion dollars will
further erode the effectiveness of the CRA in serving low and moderate-income
communities. The increased asset definition of a small bank will
dramatically increase the number of state-chartered banks (879) not
subject to a comprehensive CRA exam. The less stringent examination
will allow these newly defined small banks to relax compliance activities
to meet the CRA examination thus reducing CRA’s effectiveness
of meeting the financial needs of low and moderate-income communities.
Lastly, the expansion of the definition of community development
to include all individuals in rural areas contradicts the expressed
original intent of the CRA to have a continuing obligation to serve
the credit and deposit service needs of their local communities,
including low and moderate-income areas. To extend the definition
of rural community development to all individuals in rural areas
could lead to the loss of coverage for low and moderate-income communities
in rural America to serve only the most profitable higher income
rural communities.
All three proposed regulatory changes to CRA will adversely impact
the original statutory intent of a law that has been successful in
expanding access to capital and financial services to every community
across the United States. Your actions on this matter are of great
concern to CDFIs across the country and I strongly urge the FDIC
not to adopt the proposed changes.
Sincerely,
Jennifer A. Vasiloff
Executive Director
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